Resale pricing: the wrong kind of support

The UK's Office of Fair Trading issued a Statement of Objections to three major high street retailers in connection with resale price maintenance agreements.

This week the UK's Office of Fair Trading issued a Statement of Objections to three major high street retailers (John Lewis, Debenhams and House of Fraser) and a manufacturer of sports bras (DB Apparel) in connection with an investigation into resale price maintenance agreements.

The OFT's investigation was launched in April 2012. The alleged competition law infringements relate to nine agreements entered into by DBA and the three retailers (three agreements with each retailer) over the period from 2008-2011, which the OFT believes had the aim of increasing the retail price of DBA's "Shock Absorber" sports bras.   By issuing the Statement of Objections, the OFT is indicating its provisional view that, having carried out an initial investigation and reviewed parties' responses to requests for information, the agreements were unlawful resale price maintenance agreements.  The parties now have the opportunity to respond to the Statement of Objections.  A final decision on the case is likely to be forthcoming around March 2014.

Unlawful resale price maintenance agreements will include any agreement which has the object or the direct or indirect effect of setting a minimum or fixed resale price.  In the EU, agreements of this sort are considered to be serious ('hardcore') infringements of competition law because they tend to increase the price for consumers, facilitate price collusion between manufacturers, and diminish competition between manufacturers and/or retailers. 

Recommending the resale price or fixing a maximum resale price is, however, generally permitted.  Fixing the resale price for promotions and/or for new product launches can also be permitted in some circumstances and provided the promotion or campaign only lasts for a limited period.  

This investigation highlights the OFT's continuing interest in pursuing retail cases as they are perceived to have high consumer impact.   

If you would like to discuss this issue, please do not hesitate to contact John Cassels.